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Construction Topic: Tips in negotiation of contract terms with general contractors
Subcontractors: tips on negotiating contracts with general contractors
These 8 tips will go a long way in helping you to avoid traps that GC’s typically set in their contracts. In big contracts, or in dealing with large GC’s, you may be given a lengthy subcontractor agreement based on an AIA form, which is designed to favor the GC and disfavor the sub.
In my experience, some GC’s will negotiate, but most will tell you to take or leave it. With these types of contracts, particularly on the big jobs, it is worth the money to have a lawyer look through it and red line the weasel clauses. If the project is not that big, or, if the GC most likely will not negotiate – it is a business decision on your part whether to assume the significant risks hidden in these clauses
Most contracts prepared by GC’s for subs will contain a provision where the GC has the unilateral right to demand that the sub work overtime to meet deadlines without any obligation that the GC compensate the sub for the sub’s expenses related to the extra work. Subs need to make sure that the GC’s contract does not have this language, and if it does, re-write it as follows: “Upon written notice by General Contractor to Subcontractor, of the need for overtime by the Subcontractor to meet General Contractor’s performance deadlines, General Contractor agrees to reimburse Subcontractor for all costs related to overtime work, plus an additional 10% profit Typically in construction contracts, all change orders or extras are required to be in writing. Unfortunately, rarely does this occur, and when it does, the documentation is often ambiguous or faulty.
Here is the golden rule: always, always, always get the GC’s manager to email or send you a fax, authorizing the change order or extra before you do the work or order materials. Even if you know the manager well and trust his word, this weasel clause will give the GC or the owner a reason which can be used to refuse payment, as the contract will usually require the written approval as a condition of payment.
Also, make sure the contract specifically states that the project manager that you are dealing with is authorized to approve the change order. Many times the only person who is authorized to approve the change order or extra is the person signing the contract on behalf of the GC. The “pay-when-paid” clause is infamous, and the source of many billions of dollars in litigation fees. This clause will state something to the effect that the GC does not have to pay the sub until the owner pays the GC. This is typically phrased as a “condition precedent” in the terminology of the clause. You need to strike this language, and insert something to the effect of: “General Contractor agrees to pay Sub within 30 days of the General Contractor’s receipt of invoice, regardless of whether General Contractor has been paid by Owner.”
In any event, a delinquent accounts receivable on a poject of over 40 days, should be a red flag, and you need to make phone calls to determine the status of the nonpayment before you over-extend your business further Beware of any clause that binds the Sub to the terms of the Contract between the GC and the Owner. You will assume liabilities and responsibilities that are significant, without compensation. Many times the Owner’s contract will not be provided, or will have attachments or amendments which are not disclosed to you Many times when you are signing the contract with the GC, there will be a set of plans or specs attached to the contract. You need to know and have the contract affirm that the plans/specs provided are current and complete, and also if possible, have the contract specifically state those pages of the plans, specs, revisions which apply to your work.
Many times you will bid on an old set of plans which have changed, but the contract you sign will obligate you to the new plans – which could devastate you financially Most contracts drafted by or for GC’s will require that a Sub obtain all necessary permits or licenses to perform the work. You need to contact the municipality not just the county, to make sure you are complying with this provision .
These are clauses which impose liability on the Sub, not only for the Sub’s own negligence on the job site, but also for the negligence of the GC or other parties outside the Sub’s control. It is absolutely crucial that you re-write this clause to assume liability only for your own negligence, and specifically state that you will not assume liability for the GC or any other third party.
Check your contract to determine: (1) if there is an arbitration clause to resolve disputes under the contract; (2) if there isn’t, see if the contract states the location of where any lawsuits must be filed if there is a dispute, and what laws apply (some contracts provide for venue and choice of law in other states, far, far away); and (3) if there is a clause which provides attorneys’ fees to the GC in the event that there is a dispute — re-write this clause to make it mutually beneficial to both parties — where the prevailing party to any dispute is entitled to reimbursement for actual attorneys’ fees and costs.
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Although contractors often have no opportunity to discover concealed conditions before executing contracts and bidding the work, they sometimes unwittingly assume the risks of such hidden conditions and may be held liable for the additional cost to overcome them, depending on the contract language. Many contracts drafted by owners require contractors to accept responsibility for unanticipated costs that may result from site conditions. Many such contracts also require contractors to acknowledge they have fully examined and analyzed all site conditions that may affect performance and to affirm no conditions exist that may affect the progress, performance, or price of the work.
Examining a contract for such clauses before agreeing to sign it and changing these clauses so the duties mentioned are limited to visible conditions and responsibility for unforeseen or hidden site conditions is clearly disclaimed can save a contractor from substantial liability. Therefore it is important a contract be reviewed prior to its execution to ensure no such liability is imposed on the contractor.
When in doubt as to the effect or meaning of a particular clause or whether a contract imposes liability for unforeseen or hidden site conditions, contractors should consult with their attorneys. Alternatively, they should compare the clause in their contract to Article 4.3.4 of the AIA A401 Standard Form of Agreement Between Contractor and Subcontractor. That clause, an example of a fair and reasonable differing site conditions clause, provides that if concealed conditions differ materially from those indicated in the contract documents (commonly referred to as “Type I Conditions”) or if physical conditions are of an unusual nature that differ materially from those ordinarily found to exist and generally recognized as inherent in construction activities of that type (commonly referred to as “Type II Conditions”), provided written notice is given promptly and before the conditions are disturbed, the contractor may be entitled to an equitable adjustment in the contract sum, contract time or both.
hidden or unforeseen physical condition is discovered, it is important not to disturb the condition and act quickly to provide written notice. Many contracts provide a small window, sometimes as little as 48 hours, for the contractor to notify the owner/designer/general contractor of a condition it has discovered. Accordingly, upon discovery of a hidden or unforeseen physical condition, contractors should immediately stop working in the area and consult the contract to determine their obligations. Usually, a contract will require written notice to identified parties within a specific period of time, as well as a statement as to the effect on cost and time to complete. After ensuring the condition is not disturbed, complying with the time limitation is the foremost concern and, within the identified time frame, contractors should endeavor to provide as much information as is obtainable. If they are unable to collect or draft all of the required information in the time frame, they should send the information they have along with a note explaining what is missing and advising that they will supplement the notice as soon as they are able. Regardless of whether additional costs are approved as a result of the condition, ensure that separate cost codes are put in place for work performed as a result of, or to overcome, the condition. Accounting should be kept separate for this work to the greatest extent possible.
hidden or unforeseen physical conditions are usually enforceable, subtle aspects of the contract, such as the language used in the inspection clause and the detail with which the work is described, may render the clause unenforceable. Moreover, some states will grant relief to the contractor if both parties shared an affirmative but incorrect belief as to the site condition. Accordingly, contractors should always consult their attorneys for their opinion as to whether the clause is enforceable. If the notice provision does not allow sufficient time to wait for the attorney’s opinion, contractors should proceed as if they were entitled to an extension, an increase in the contract price or both. Not all owners/general contractors will stand on the contract and require contractors to absorb the cost of the hidden condition simply because they are able to. If they keep the lines of communication open and honest, provide prompt written notice of the hidden condition and its effect on their work, a fair and reasonable owner/general contractor may work with them to reach an equitable solution.
ParsCo Construction – Pensacola, FL Residential Builder
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ParsCo Construction Topic: Planning
ParsCo professionals understand the importance of planning. Without the planning process, there is no way to ensure that building project will be in accordance with established plans. “When planning a project, you always must pre-plan the plan” states Amir M. Fooladi, President/CEO of ParsCo Construction.Â
The project planning process requires a clear understanding of the project, the process involved, the activities involved jn completing the project, and the agreed upon project goal. Â ParsCo begins the pre-planning process and once the program requirements are determined, ParsCo sets up a meeting of the various players involved in the building of the project. This includes the Owner, Design consultants, and contractors. This may also include local building officials and a Financing institutions if necessary. The planning process involves that all parties work together, as a result all parties will have a vested interest in the project’s successful completion.
“We all need to understand the importance of the interests of the parties involved in the planning process” explains Amir, “and it all starts with the Owner, the interests of the design, and most importantly the end product. By understanding the outcomes and interests of each party in the planning process, we can better understand how the building process is approached to meet the needs of everybody, especially the Owner”.Â
The Owner’s interest in the project planning process stems from his or her desire to see the project built. The Owner has a desire to take occupancy of the project at some future date. To do so, the Owner participates in the planning process to ensure that schedules are set in order to build the project on time. The Owner uses the information in the planning process to determine the length of time needed to set up and pay for arrangements as well as schedule the purchase of furniture and other necessities.
The Design team needs to establish certain timelines for the building of the project. These schedules are set forth in the project process and agreed upon with the Owner. The architect’s plans incorporate the timeline for the project into the design plans in order to help the Owner and ParsCo meet their deadlines. If the planning process does not take place, there is no way to determine the best approaches for incorporating the design elements that are envisioned in the plans.
The project planning process helps ParsCo determine the expectations for the completion of the projects construction within the design elements that are set forth in the design. All parties are dependent on the project planning process to schedule and meet the ultimate goal.Â
No building project can be successful without the discussions that need to take place in order to properly plan how the project will be built. By engaging ParsCo and starting the planning process, the team can be assembled so that all the information from all of the parties can be gathered, organized, and make the common goal of a successful project a reality. The project planning process is an important part of the building process that must be incorporated.Â
For more information on how ParsCo can help make sure your next project is properly planned, call (850) 776-6265.Â
Pensacola General Contractor specializing in custom homes and commercial construction.
ParsCo offers general contracting services for new construction, remodels, renovations, and additions. Give us a call at the number below. We look forward to working with you.
ParsCo, LLC
850.776.6265
Visit us on the web at www.pars-co.net
So if you are constructing a deck and you don’t want this to happen to you, you might be asking yourself “how strong should I build my deck?” Of course, how strong you decide to build a deck depends on the anticipated loads you expect to have on your deck. And there can be quite a range, especially if you are anticipating a hot tub or large gatherings of people (like the alleged 200 people in the news story links above)…
Many people are intimidated with trying to figure out the load capacity for a deck and this is why it is always best to enlist a ParsCo engineering professional to assist you in doing the calculations.
Many contractors aren’t sure where to begin so they just over build – which may be entirely unnecessary and cost you more money. Another problem that can arise from over building is a sinking deck. ParsCo professionals are thorough and if required will conduct a soils report to assist in determining the loading as it relates to the soils.
But even if you build a strong deck it can gradually sink into the soil if you don’t take into account the size of footings in respect of the load for the deck. Once your deck starts sinking it can rip the ledger board away from the house or you will have to jack up the sunken area, excavate and pour a new larger footing. All of these situations will cost you even more money!
These issues cost money and when you consider the potential failure and replacement costs, the extra cost on the front end to do things right with ParsCo far outweighs the alternative.
So for those do-it-yourself type of people that might be interested in building a simple deck for you and your family (not 200 people) you should always consider and utilize the following logic when designing and constructing a deck.
The load that is placed on your deck is expressed in pounds per square foot (psf) and the total load or more appropriately, the design load, is comprised of the dead load and the live load.
Dead load is basically the load created by the weight of the deck itself. This is usually about 10 psf depending on the material you use. The live load is created by all the extras like furniture, planters, and people. This is usually about 40 psf (special consideration should be taken though). So using these figures as an example, the design load would be 50 psf.
Of course, if you expect a lot of snow to sit on your deck over the winter or envision an 8,000 lbs hot tub on the deck or 200 Spring Breakers even, this could increase the required load capacity of your deck up to 100 to 200 psf or more!
In order to be able to determine the amount of force that is exerted from the deck surface to the footings, it helps to conceptualize the path that the forces travel from their source to the ground.
The deck itself and anything on top of it exerts downward force which is transferred to all the beams and any ledger boards that are connected to the house. This is an axial load. The force on the beams is then transferred down to the posts. The force on the posts is then distributed into the concrete pier and ultimately spread over the surface area of the footing which is then displaced over the soils. The larger the footing the more the force is spread out and the less chance of your deck sinking. This is all dependent on the soils though.
If you can follow and understand this information then you may be interested in the AWC publication for deck construction.
http://www.awc.org/publications/dca/dca6/dca6-09.pdf
Call ParsCo at (850) 776-6265 for the highest quality construction services in one of Historic Pensacola’s newest and most elite neighborhoods, Nature Trail Subdivision Pensacola.
Nature Trail is a residential community designed through 750 acres of forest environment in Pensacola, Florida. It is conveniently located on the west end of Nine Mile Road, just one mile west of I 10, Exit 5. Nature Trail is unique with a community lodge, pools, tennis courts, playground features, and multiple natural parks throughout. Guard house and gated entries will greet owners and visitors. Residents will be able to enjoy a series of walking trails amongst the 400 acres of Nature Conservancy.
Visit NatureTrailBuilder.com for more information.
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